— Nautilus Research (@NautilusCap) September 25, 2023
Today’s Chart of the Day was shared by Nautilus Research (@NautilusCap). Over the past three months, the S&P 500 has formed a potential Head & Shoulders top. The neckline of this bearish pattern coincides with the August 2022 highs, around 4,300. We could argue the nuances and validity of this pattern, but most would agree this pattern should be bearish. The thing is, we’re all watching the same movie here. The S&P 500 is the most over-analyzed chart in the world, and many are seeing this bearish pattern. When patterns become too obvious, they tend to fail. And when patterns fail, you often get a sharp reaction in the opposite direction. In this case, that would mean a sharp reaction higher. Failed patterns can often be more powerful than successful patterns. As Nautilus points out, it wouldn’t be the first time in recent history that we had a well-broadcast Head & Shoulders top resolve sharply higher.